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Issues: (i) whether the demand notice and possession notice under the SARFAESI Act were validly served on the borrower or the legal heirs; (ii) whether the writ petition was maintainable despite the statutory remedy under section 17; and (iii) whether the auction sale and sale certificate were vitiated by fraud and statutory non-compliance.
Issue (i): whether the demand notice and possession notice under the SARFAESI Act were validly served on the borrower or the legal heirs.
Analysis: The statutory scheme required service of demand notice under section 13(2) in the manner prescribed by rule 3 of the Security Interest (Enforcement) Rules, 2002, and further action under section 13(4) could follow only upon such compliance. On the facts, the notices were issued after the borrower's death, the bank's stand on service was contradictory, and no proper service by the prescribed modes was shown. The court treated the alleged notices as having been issued against a dead person and held that the mandatory procedure was not followed.
Conclusion: The notices were invalid and the SARFAESI measures were vitiated.
Issue (ii): whether the writ petition was maintainable despite the statutory remedy under section 17.
Analysis: The existence of an appeal under section 17 does not oust writ jurisdiction where there is breach of mandatory statutory procedure, violation of natural justice, and infringement of the right to property protected by article 300A of the Constitution of India. As the petitioners came to know of the proceedings belatedly and the challenge was founded on jurisdictional and procedural illegality, the alternate remedy was not treated as a bar.
Conclusion: The writ petition was maintainable.
Issue (iii): whether the auction sale and sale certificate were vitiated by fraud and statutory non-compliance.
Analysis: The court found serious irregularities in the auction process, including doubtful reliance on alleged authorisation, acceptance and refund of money through third parties, and tampering of bid amounts. These circumstances led the court to hold that the bank had not acted fairly or transparently and that the auction process was tainted by fraud and lack of probity. The plea of bona fide purchaser protection was rejected because fraud went to the root of the transaction.
Conclusion: The auction sale and sale certificate were set aside.
Final Conclusion: The secured creditor's action was held to be illegal for want of mandatory notice and for vitiating fraud in the auction process, and the petitioners obtained relief against the sale with consequential restoration of possession and costs.
Ratio Decidendi: When SARFAESI measures are taken without strict compliance with the mandatory notice requirements and the auction process is tainted by fraud, the entire action is void and cannot be sustained notwithstanding the availability of a statutory appeal.
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